● Exportssurprised on the upside, climbingto an eight-month high in March (4.2% YoY;consensus: -6.8%; Feb: -4.5%), amida weaker THB (32.09 per USD; Mar-19: 31.72).

● Bysegment, the rebound wasunderpinned bymanufacturinggoods, outweighing a sharpdownturnin shipments ofmineral & fuel

- Manufacturing (6.4%; Feb: -5.2%): largest expansion in 13 months, reflecting a surge in exports of unwrought gold (215.2%; Feb: 178.4%), as gold prices soared on flight to safety.

- Mineral & fuel (-19.7%; Feb: 6.6%): sharpest decline in four months due to falling shipments of refined fuels and crude oil, amid steeper contraction in crude oil price (-49.7%; Feb: -13.9%).

● By destination,theincreasewasprimarily duehigherdemand fromthe US (42.9%;Feb:-37.0%) and Hong Kong(58.9%;Feb:- 3.0%) and softer drop in demand from Japan (-2.8%; Feb: -11.1%)

- Of note, exports to the US surged due to higher shipments of weapons following the annual Cobra Gold military exercise.

● Imports spiked to its strongest in 14 months (7.3%; consensus: -10.8%; Feb: -4.3%)

- Improvement mainly driven by favourable turnaround in imports of raw materials & intermediates (12.0%; Feb: -5.5%) and fuel lubricants (9.0%; Feb: -12.1%), potentially due to frontloading activities in anticipation of a stricter movement restriction.

- Imports of consumer good remained in contraction (-4.9%; Feb: -6.8%), suggesting cautious consumer sentiment.

● Trade balancenarrowedto a two-month low (USD1.6b; Feb:USD3.9b) as imports (24.3%) grew at a faster pace compared to exports (8.5%) on a MoM basis.

● 2020 exportsforecastrevised down to -10.0 to -5.0% from -2.0-0.0% (2019: -2.7%) on adverse spillovers from the COVID-19 pandemic

- Widening adoption of movement restriction across the globe to disrupt global supply chain and consumer purchases, consequently weighing on exports performance in the near term.

- We expect the BoT to remain on an easing course, embarking on another 25 bp rate cut in May, given the slash in the banks contribution rate to the Financial Institutions Development Fund from 0.46% to 0.23% of deposits annually, which indicates a reduction in the effective lower bound for the policy rate.

Source: Kenanga Research - 22 Apr 2020